COMPANY'S INCOME STATEMENT

The income statement is one kind of major financial statements which is used by accountants departments and business owners.  The income statement is referred to as the profit and loss statement , statement of operations, or statement of income. It is a summary of a management's performance as reflected in the profitability of an organization over a certain time of period.

 It is based on a fundamental accounting assumption, Income = Revenue - Expenses and shows the rate at which the owners equity is changing for better or worse. Along with balance sheet and cash flow of statement it forms the basic set of financial information required to manage an organization. It also called earnings report, operating statement, or profit and loss account.


It is very important  format an income statement so that it is appropriate to the business being conducted.It is required by potential lenders, such as banks, investors, and vendors. They will use the financial reporting contain and determine credit limits.

1. Sales
Sales figure represents the amount of revenue generated by the organisation. This amount recorded here is the total sales, less any product returns or sales discounts.

2. Cost of sales
This number represents the costs directly associated with making or acquiring  products. Costs include materials purchased from suppliers used in the manufacture of  product, as well as any internal expenses directly expended in the manufacturing process.

• Gross profit
Gross profit is derived by subtracting the cost of goods sold from net of sales
3. Operating expenses
These are the daily expenses incurred in the operation of  business.

• Sales salaries
These are the salaries plus bonuses and commissions paid to sales staff.

• Advertising
These represent all costs involved in creating and planing print or multi-media advertising.

• Rent
These are the fees incurred to rent or lease office or industrial place.


6. Taxes
This is the amount of income taxes  owe to the government and, if applicable, state and local government taxes.

7. Net income
This is the amount of money the business has earned after paying income taxes.

It is a measures a company's financial performance over a specific accounting period.